Pay - roll with the changes

By
Shan Hughes

27 February 2019 00:00

With the new tax year fast approaching make sure you make your employer clients aware of forthcoming changes.

Are your payslip details up to date?

Hours worked

From 6 April 2019, change may be needed to payslips for employees in some circumstances. If employee pay varies because of time worked, perhaps under a variable hours or zero hours contract, it will be necessary to show the number of hours worked for which payment is made. The number of hours must be shown as either a single aggregate figure or separate figures for different types of work or different rates of pay.

Are you clear on who your ‘workers’ are?

In a move that reflects the diversity and complexity of employment status, the right to be given a payslip is also extended to all ‘workers’ from April 2019. At present only employees have this right, and not all ‘workers’ are employees. HMRC offers some guidance on how ‘worker’ status should be assessed at bit.ly/2QyKFEW.

You may also need to bear in mind that whereas employees are automatically on the payroll, ‘workers’ may not be. It will therefore be prudent to check payroll software can accommodate such change, where relevant. We are able to assist with any issues regarding employment status. Please do not hesitate to contact us for further advice.

Yet another type of Student Loan

The Postgraduate Loan (PGL) is a new type of student loan available in England and Wales. Employers need to be ready to deal with the loan repayments via payroll (as well as the two existing types of student loan (SL)).

The first PGL repayments will be made from April 2019. Be aware that an employee could be liable to repay a SL type and PGL simultaneously, as they are different types of loan product. Employers will therefore have to make both PGL and SL deductions.

PGL repayment will necessitate the introduction of new forms: PGL1 is the new start notice, requiring an employer to make deductions for an employee with a PGL. The first PGL1s will be issued alongside the SL deduction start notices (SL1s) in February/March 2019. HMRC will update the starter checklist to include a section for PGLs. P45s will not change, but P60s will have a new box to show the PGL deductions.

HMRC would prefer PGL and SL deductions to be shown separately on payslips (as I am sure would the employee - so they can see what they are paying on each loan).

Thresholds for 2019/20

From 6 April 2019, the repayment threshold for Plan 1 SLs is £18,935, and £25,725 for Plan 2 loans. SLs are repaid at 9% over the relevant threshold.

The PGL repayment threshold is £21,000. PGLs will be repaid at a rate of 6%, deductions being collected through the normal PAYE process. So if an ex student has a SL and PGL the deductions over the respective thresholds would be a combined 15%!

National Minimum Wage rates on the increase

New rates for the National Minimum Wage (NMW) and National Living Wage apply from April 2019. The hourly rates rise to £3.90 for apprentices; £4.35 for those under 18; £6.15 for those aged 18 to 20; £7.70 for those aged 21 to 24; and £8.21 for those aged 25 and over.

Get it right

HMRC reports frequent errors when apprentices are paid. Apprentices aged 19 or over, who have finished their first year of apprenticeship, are entitled to the age-related minimum wage. HMRC has also clarified that in some circumstances, those on work experience or internships may qualify as workers for minimum wage purposes. HMRC guidance now includes a new section on the complex area of ‘unpaid work trials’ bit.ly/2RAZdbB.

Motoring BiK charges on the up

Autumn Budget 2018 announced that for the purposes of company car tax, the relevant CO2 emissions figure for cars will be based on the new Worldwide harmonised Light vehicles Test Procedure (WLTP). For cars registered before 6 April 2020 however, the current New European Driving Cycle (NEDC) test applies.

The Spring Statement on 13 March 2019 will report on the government’s review into the impact of WLTP on company car tax generally. To keep your clients informed of pertinent Spring Statement announcements why not order our summary (insert link here)

As you are no doubt aware, the BiK charge on an employer-provided car is based on the list price of the vehicle, multiplied by a percentage linked to the car’s CO2 emissions. Diesel cars are generally subject to a 4% supplement unless the vehicle meets the Euro 6d standard. HMRC guidance on how to report, payroll or calculate the cash equivalent for diesel cars meeting the Euro 6d emissions standard is available at bit.ly/2GWTWHg.

Increased % benefits ahead

The car benefit percentage charges are generally due to increase by 3% from 6 April 2019. To calculate fuel benefit charge for a car, the multiplier increases to £24,100 for 2019/20. These and other rates and allowances are included in our tax rates products.

Pension contributions set to rise

The next increase in auto-enrolment contributions takes effect from 6 April 2019. The new minimum contributions are designed to ensure a total minimum contribution of 8% from this date. This will usually be made up of an employer minimum contribution of 3% and staff contribution of 5% but take care that the increase is calculated in accordance with the particular scheme rules.

It is advisable for employers to write to employees, advising them of the new level of contributions. The Pensions Regulator website has guidance on how to set up the increased contribution levels and a pro forma letter for employees bit.ly/2sgpqxL.

Childcare vouchers vs Tax-Free Childcare

Employer-Supported Childcare (ESC), via childcare vouchers and directly contracted childcare schemes, closed to new applicants on 4 October 2018. The government is gradually substituting support through Tax-Free Childcare (TFC), although this isn’t available to all. See Childcare Choices website bit.ly/2RyakSR. The changes have no impact on workplace nurseries, which although rare, remain a tax-free benefit.

Although employers may still provide childcare vouchers to new applicants, these would be subject to income tax, and both employee and employer payroll Class 1 National Insurance contributions, making provision more costly and creating an additional employer workload.

Employees can switch from ESC to TFC, however, they cannot rejoin ESC, so consider better-off calculations (available via the Childcare Choices website) first before making the switch.

If employees change to TFC, they should tell their employer in writing within 90 days. Employers must then stop the provision of vouchers and the associated income tax and National Insurance relief. This could mean stopping or changing a salary sacrifice arrangement. Employee contracts and payroll software would then also require updating.